Greece's embattled prime minister George Papandreou held crisis talks with Germany's chancellor Angela Merkel on Tuesday in a telephone conversation that followed the EU's decision not to disburse further aid to Athens until it implemented crucial reforms.

Fears of an imminent Greek default sent markets into a tailspin amid concerns that it could throw the global economy into a double-dip recession but the socialist leader reassured Merkel that his government was committed to pursuing painful reforms "whatever the political cost".

Berlin is determined that Athens enforces long-overdue fiscal "corrective" measures envisaged as part of a second €109bn (£94bn) rescue package approved for the debt-stricken nation in July – even if eurozone finance ministers now agree that the deal needs to be recrafted in light of Greece's inability to meet its fiscal targets.

With the country trapped in its worst recession since the second world war, its finance minister Evangelos Venizelos conceded that the budget deficit – revised upwards from 7.6% to 8.5% – could exceed 9% by the end of the year.

The spectre of more missed targets despite trenchant austerity has fuelled public anger – a planned general strike is poised to cripple the country Wednesday.

Venizelos,, sounding upbeat despite being locked out of his office by protesting civil servants for several days, tried to assuage some of that anger by saying more belt-tightening would not be required as long as Greeks were "consistent, organised and correct".

He said: "We have three critical months ahead of us and we have to make a superhuman effort. Greeks should support these efforts by paying their taxes.

"Tax evasion and the black economy are major problems."

But after a barrage of cuts to wages and pensions and increases to taxation and prices, Greeks have reached their tipping point. Unions are up in arms over the likely replacement of the minimum wage with a more flexible pay scale in the public sector. "These policies will take us back to the last century," said Yiannis Panagopoulos who heads the Confederation of Greek Workers. "We will fight them."